In a medium-size bowl, sift together flour, baking powder, salt, and nutmeg.
Beat butter and sugar together until well-mixed. Add egg yolks and mix until blended.
Add dry ingredients and sour cream alternately to the butter mixture, ending with flour, and mixing well between additions. The dough will be sticky.
Cover bowl and chill for 1 hour.
On a floured board or table, roll the chilled dough out to about ½ inch thick. Use a doughnut cutter or two differently sized biscuit cutters to cut out the doughnuts, dusting the cutters in flour as needed to prevent sticking.
Pour the lard or oil into a heavy-bottomed pot to at least 2 inches deep. Heat oil to 325°F.
Add the donuts to the heated fat a few at a time, being careful not to overcrowd the pot. Fry on each side about 2 minutes, but watch to make sure they don’t burn. Remove from pan and drain.
Dust the warm doughnuts in cinnamon sugar or sprinkle them with powdered sugar. Cool before serving.